Thursday, January 27, 2011

Critic of Free Markers Gets It Wrong

James Tatum writes in THE EASTERN ECHO – “News and nonsense spiced with nerve” - (HERE)

'Free-Marketeers' have it wrong”

“These prophets of laissez-faire economics present a false choice between the heavy hand of government and the invisible hand of the market.

“The invisible hand of the market,” a metaphor used by economist Adam Smith in his book “The Theory of Moral Sentiments,” was used to illustrate the point market forces, not government, should be used to allocate resources within society.Free-market fundamentalists often cite the point made in Smith’s book, all the while omitting another point that Smith made within the very same text.

Smith also believed government had an important role to play in the economy. He believed the government should enforce contracts, provide public works and most importantly protect consumers.”

Comment

Adam Smith did not use the metaphor of “an invisible hand” in The Theory of Moral Sentiments (1759) to “illustrate the point market forces, not government, should be used to allocate resources within society”. He did not even mention “market forces” nor “government” (See Moral Sentiments, Part 4, Chapter 2).

He was discussing how “proud” and “unfeeling” feudal landlords, basking in their self-important greatness, were obliged to feed their retainers (thugs) and their downtrodden serfs and their families from some of the produce of their land and they were “led by an invisible hand”, unintentionally, to enable the survival of the population and, through their “progeny”, to generate a growing population. They had no choice but to maintain the subsistence of their serfs because without subsistence, who would plant the crops and harvest them?

No markets are mentioned, nothing about “capitalism’, and nothing (not a word) about “government”, nor its roles. James Tatum has not read, nor understood, Adam Smith’s Theory of Moral Sentiments.